Department of Energy on Quarter 4 performance, with Minister & Deputy Minister

Meeting report

The Chairperson welcomed Minister Mmamoloko Kubayi and Deputy Minister Thembi Majola.

Minister of Energy opening remarks
Minister Mmamoloko Kubayi noted that there is a large number of vacancies in DoE. The day before, DoE had interviewed for three DDG positions. She had also written to the boards of DoE agencies to advertise their vacancies by 31 July 2017, so that in August the interviews can commence as well as appointments.

The high vacancy rate is due to the new approved department structure although DoE does not have money to fund those posts. However, DoE is going to focus on the more critical vacancies and do more with less. DoE will report back to the Committee by the third quarter of this financial year.

The Minister confirmed that the CFO has been suspended, but she is not at liberty to share in depth the details of the disciplinary hearing, however once the process has been concluded, DoE will provide the details. Secondly, she confirmed that DDG for Policy, Planning and Clean Energy, Mr Ompi Aphane, is suspended. He was given an opportunity to respond to why he should not be suspended but he failed to do so. DoE is in the process of establishing a disciplinary committee as required by the Public Service Act, and it is still within the 60 days. Independent people will be appointed to the disciplinary committee.

With regards to the IEP and IRP process, DoE is well on track. She receives monthly reports on the programmes and from the reports DoE is well on track in terms of its commitments. However, the finalisation will no longer be at the end of March 2018, but in February 2018 as per the Minister of Finance’s request. There are regular meetings at Inter-Ministerial Committee (IMC) levels, and the Minister will be reporting to it tonight; in addition there is also monitoring on the government’s side of the IEP and IRP process.

The Minister reported on the signing of the Power Purchase Agreements (PPAs) of the independent power producers (IPPs. DoE is in progress with this and at the end of this month a decision will be issued. There is positive progress, and the date of finally concluding Bid Windows 3.5 and 4 which government has committed to. DoE has a responsibility to protect the sector. However, the concern is the interdict initiated by the coal industry requesting the Minister, Eskom and Nersa not to sign the PPAs, DoE is trying to deal with that so that the matter can be concluded. The Minister has a duty to represent everyone in the sector, but the lobbying in the sector makes it difficult for the coal industry to grow. She expressed her wishes that everyone in the sector can work together instead of being absorbed in their own interests.

On the nuclear transactional advisor matter, the Minister has received a number of questions from various stakeholders asking if DoE has received an adverse opinion from the Auditor General due to the contract for a nuclear transaction adviser being irregular. The audit has not yet been concluded and once it has been concluded DoE will be able to report on the matter to the Committee.

With that being said, the Minister assured the Committee that regular meetings are held with EXCO in order to try and improve performance. As DoE improves its agreements and performance plans, practical changes will actualise.

The Chairperson thanked the Minister for the update, and asked for clarity about the transactional advisors matter whether her comments relate directly to the transactional advisors or to the software procurement of the nuclear procurement management system.

The Minister responded that it seems there is confusion about those two matters; sometimes people think that DoE has already received an adverse audit opinion. She stated that no audit opinion has been issued by Auditor-General on these two matters as yet, because the audit is still being conducted.

The Chairperson advised that DoE proceed with the report.

Department of Energy (DoE) on Quarter 4 performance for 2016/17
Acting Director General, Mr Zizamele Mbambo, introduced the delegation and noted that Mr Jacob Mbele, Acting DDG, would present the non-financial information.

Mr Mbele stated that he would not go through every section of the presentation but flag the important parts of it, but Members are welcome to ask questions of clarity on the other parts. He highlighted the key achievements of the Quarter 4 performance:
• 5,087 GWh of electricity was generated over the past 12 months by 40 renewable energy independent power producers (REIPP) projects, including job creation, social upliftment and broadening of economic ownership
• 11,343 Non-grid connections were completed
• 85.44% of petroleum licence applications approved have more than 50% HDSA ownership in Quarter 4
• Developed the electricity price path
• Enforcement notices issued in 90% of non compliance cases identified during routine compliance inspections
• In line with Cabinet directives and GCIS guidelines, DoE achieved the set target for Public Participation Programmes (PPPs)/Izimbizo which include opportunities for the three levels of government to interact with the public on energy policies, programmes and projects.

Programme 1 (Financial Management Services): DoE achieved its planned targets except reducing the vacancy rate to 10%. Instead, the vacancy rate increased to 13.76% due to terminations that increased relative to recruitment. DoE partly achieved 2% employment of people with disabilities in Q4 (1.7%). The 50% target for employment of women in senior management positions was partly achieved (36%). This was due to terminations that increased for both groups.

Programme 2 (Governance and Compliance): DoE outlined its part achievement of drafting of Amendment Bills and the development of norms and standards for municipal electricity infrastructure asset management off-take agreements (see document).

Programme 3 (Petroleum and Petroleum Products Regulation): all targets were achieved.

Programme 4 (Programmes and Projects) most targets were achieved with just a few partly achieved.

Programme 5 (Nuclear Energy): the targets for completion of the procurement of a nuclear power reactor were not achieved due to the procurement process being transferred to a state owned entity (see document).

Programme 6 (Clean Energy) the 0.5 TWh of energy savings realised and verified from Energy Efficiency and Demand Side Management (EEDSM) projects was not achieved due to retrospective nature of verification process. The incorporation of stakeholder comments and finalisation of the National Biogas and Biomass Strategy implementation was not achieved due to constrained resources. The Solar Water Heating Programme was partly achieved because high local content baseline systems have been procured. However, Municipal Framework Agreements have been signed at three municipalities (Tlokwe, Sol Plaatjie and Bitou).

Ms Camagwini Ntshinga, DoE Acting CFO, presented the financial performance. Administration had an overspending of R35.76 million (14.48%) which was attributable to:
• The overspending of R5.53 million in compensation of employees as result of budget reductions implemented by National Treasury from the 2015 MTEF process, and an inadequate budget allocation to cater for filled posts.
• An overspending of R29.21 million mainly in the following areas:
- Operating leases for office accommodation and property payments as a result of increased payments associated with the relocation of several regional offices and budget reductions.
- Computer Services due to the procurement of a VPN system, additional software packages and the difference in the rand-dollar exchange rate associated with procurement of software licences.
- The net-budget overspending of R1.46 million in transfer payments is due to foreign membership fees carried over from 2015/16.

Programme 2 and 3 expenditures were on par with the revised final appropriation. Under-spending on Programme 4 was R35.99 million due to under-spending of R1.91 million for vacancies and R34.08 million due to the delay in physical verification of installed Solar Home Systems prior to disbursement of payments in the Non-grid electrification programme. This also applied to the under-spending of R7.38 million for Nuclear Energy. Clean Energy under-spent by R29.79 million due to the Solar Water Heater Programme (SWHP) delays in concluding collaboration agreements with selected municipalities in the installation phase of the SWHP. The delayed installation related services included social facilitation and technical feasibility assessments, which are contingent upon municipal identification of the targeted residential areas.

Discussion
Mr M Matlala (ANC) referred to the vacancy rate and asked if people are resigning from DoE because of perceived greener pastures outside of DoE or they are being pushed out internally. DoE spends money to train people to be effective and efficient in their positions, so is there a retention programme because it would have cost DoE to train those people.

He asked if the public consultation processes are done during holidays because in his area in Limpopo, he has not come across these consultations. He noted the key positions in DoE are all acting positions, therefore the personnel cannot be held accountable fully for any mishaps because they are occupying that position for a short space of time. What is DoE doing about this?

Mr G Mackay (DA) said that he missed the previous Minister of Energy, Ms Joemat-Pettersson, because she had a thicker skin when dealing with difficult issues. He asked about the audit report being leaked. Perhaps it is fake news, but it was reported in a prominent newspaper that the Minister said she is investigating potential irregular expenditure. Why is the Auditor-General report not yet finalised as it is now August? As far as he is aware the draft audit report has been circulated to the DoE Audit Committee at least five times, so who is responsible for the delay and why is the Director General not signing off on this report. The delays in the signing off of the Auditor-General report does set off red flags considering that the nuclear tenders for transactional advisor services and the Nuclear Procurement Management System have long been irritating the Committee. He asked how much was paid for the Nuclear Procurement Management System. The original amount of the contract was inflated from R60m to R171m by DoE. The award value at DoE was R171m, while at Free State Treasury it was R60.91m. No additional documents were provided by management to justify the price difference. Why is there a misalignment in the amounts?
There are so many suspensions by the Minister in DoE, and some of them do not make sense particularly the suspended CFO when she has done outstanding work for DoE – she was suspended in May and it has been over 60 days now since the suspension. He asked why the Minister has suspended someone who has helped DoE achieve clean audits and has done exceptionally in her position. What is the progress of the disciplinary committee on this matter? The Minister has stated that she is uncertain whether the CFO is guilty or not, but surely she would not be suspended if there was no legitimate reason.

He asked if DoE is disputing the findings of the Auditor-General, and to confirm whether that is one of the reasons why the audit report is being delayed. He wanted to know the total amount paid to the transaction advisors. It was reported in the media that the total was R80 million, which is a lot of money for consulting services. Can the Minister indicate why she believes there was no irregular expenditure in this matter, because it has been flagged by various media outlets?

On the IRP, the Minister has indicated that this is well on track but yet it was supposed to be delivered in August. However, the Committee is now told that it has been moved to February next year. It is indeed confusing that last week the Minister said that the nuclear procurement programme is on route, and it is fully going ahead as everything has been put in place. However, the last time the Renewables programme was discussed, she said that the PPAs must not be signed yet because the IRP needs be updated and finalised. Therefore, it is perplexing why one section of the energy mix is being postponed whilst the nuclear programme does not seem to be waiting for the updating of the IRP and IEP. This is a ground-breaking fundamental document for government that determines the energy mix in the country. It needs to be clear how the nuclear programme is moving ahead if the IRP has not been finalised since the IRP is going to indicate how much nuclear is needed in the energy mix. This is very confusing.

He read an interesting article in the media about the Strategic Fuel Fund - the ugly cousin of the SOEs that government is dealing with at the moment. This is a company that does not have a chairman, a board or a CEO and all key positions are acting. It is reported that this company was awarded a contract for oil exploration off the coast of Equatorial Guinea. However, this company is not into oil exploration and it has proven itself to be ineffective, and has illegally sold off the country’s strategic fuel stock and now it is involved in such an enormous deal. It is indeed perplexing how this company can be awarded such a contract. Perhaps the Deputy Minister could have shared some light on this since she has done some work internationally in that field, but unfortunately she has departed the meeting early.

In the document a lot is said about the IT systems and it is well-known that DoE is already in trouble with one big IT system. DoE cannot procure any IT system without going through National Treasury and there is a body established in government that deals strictly with the procurement of IT systems for government. He asked about the process that was followed for the two IT management systems procured as well the costs.

He said the Solar Water Heating Programme has been in existence since 2014 but now the architect behind it, Mr Aphane went out to the wild bushes for his sins, and Members may never understand why this programme which has accrued R1.5 billion over the last three financial years is not achieved. When Eskom was given this programme, it was accompanied by R1.5 billion to install one million water geysers, it only installed 400 000 of which 80 000 were the correct model. There has not been much success with this programme. Now Mr Aphane has been suspended apparently for irregularities with a contract awarded to a storage facility for these solar heaters. Now why would these need to be stored, surely they should be produced in time so that there is no irregular expenditure incurred on storage? When Mr Aphane presented the roll-out plan, Members commented how the plan had a lot of loopholes in the value chain for kick-backs and so forth. When is this project ever going to be functional, because people on the ground actually need this service and R1.5 billion is a lot of money? Surely with all these delays that money must be sitting somewhere in a bank account not actually being used because there are a loopholes and delays? Whatever has been done should match the remaining financials. Perhaps, the CFO can explain this, as the Committee is not aware of how the money is accounted for.

He asked the Chairperson whether DoE had a meeting with the ANC study group last night. He emphatically stated that if that is the case, it truly undermines the Constitution and at the very least it is anti-democratic. If that was the case, he would write to Speaker on the matter and how it grossly undermines the Committee’s oversight function.

He noted a quarterly report had been presented to the Committee by the CFO about the non-payment of a transactional advisor. Looking at the minutes of that meeting, he recalled that the Chairperson and Ms Mahambehlala had insisted that that specific transactional advisor be paid although the former Minister had instituted that all payments be halted until all documentation has been received and verification done. He asked the Chairperson what was the specific reason for insisting that the transactional advisor be paid.

Ms Z Faku (ANC) asked how many inspectors are employed in provinces; it seems that the expenditure is too much due to travel costs. The electrification programme is not acceptable due to its poor performance on clean energy including the Solar Water Heater programme. How is DoE addressing this?

Ms T Gqada (DA) asked about the DoE staff component. The Minister mentioned in her address that she has written to all the boards to fill key vacant positions, but that they cannot fill all of them. Is that not going to affect the performance of DoE, since it is already under-performing? She asked how much money has been put aside for the Imbizos and where they are taking place.

With regards to clean energy, is DoE certain that the three municipalities identified have capacity because there is an under-spending of R30 million in those municipalities?

The DoE staff complement is a challenge, so what is DoE going to do to ensure that vacancies are no longer a challenge. How is DoE planning to ensure a balanced senior management in terms of gender?

Lastly, with regards to the payments to suppliers, what is DoE’s planning process to pay off its suppliers. It seems a norm for DoE to hold the money from paying suppliers when the payments are due because it wants to go verify first for what it is paying for.

Mr M Dlamini (EFF) stated that it is very difficult to probe DoE without the Auditor-General report. Perhaps the Minister can expedite the release of the audit report, because there is a chance that what has been said today may not even be correct. He asked about the planning process of DoE, because money is being held back from payment because it seeks to verify the projects first.

The Minister responded that the Auditor-General’s report is not yet finalised. The Annual Report will be tabled to Parliament soon, and it normally contains the AG’s report. As soon as that is done, DoE will come back to the Committee to respond in detail on the AG’s report.

As for the insinuation that people are being pushed out of DoE, this is not true. People are not being pushed out of DoE; they are resigning of their own accord. However, if people are not doing their jobs properly they will be held accountable. If people do not perform, the Minister said she will act and people will not get away with things with absolute impunity. As for vacancies, for now the focus is on key critical positions. There is quite a number of support staff but very few in the technical areas. Where vacancies are available but are not critical they will be over-looked for the moment due to financial constraints.

The Solar Water Heater project is not moving and it is not performing the way that it was supposed to. DoE takes full responsibility for that. There were delays in municipalities and DoE intervened with some of the municipalities. Some municipalities are not signing and the City of Cape Town is one of those that have not yet signed so that DoE can do the technical work and part of that is to check the water quality.

As for the staff component, transformation is not only at SMS (Senior Management Staff) level but at EXCO (Executive Committee) level, there has to be the 51% representation at EXCO level too. There is only one company that has responded and will appointing its first black female from 1 September after the engagements. She hopes that the transformation in the sector will be taken seriously.

DoE takes responsibility for electrification – this is not a good scorecard for DoE. DoE is aiming at having a DDG around this area. Once this is sorted out at EXCO level, the results will start actualising.

The Auditor-General report was completed at the end of July. Upon the completion of the audit report there were issues that DoE raised as well as Auditor-General and that process is currently underway. The Minister has not had a meeting with the Auditor-General yet. She will only have a meeting with the Auditor-General once the audit has been completed. She cannot comment appropriately on the irregular expenditure questions raised by Members. Until the Auditor-General points it out as an irregular expenditure, she cannot comment on the irregular expenditure questions. She will then look at the issues raised and take on board all those issues. The meeting was scheduled but the Auditor-General team postponed it due to finalisation of some of the issues that came up.

In terms of the costs of the PMS (Procurement Management System), DoE paid R98 million and for transactional advisors it paid R87 million. There is no misalignment, the financial year ended in March, and the audit starts afterwards.

As for the IRP and IEP being finalised, the Annual Performance Plan (APP) stated that the IRP and IEP programme will be completed next year in March 2018, but because there has been delays in the previous one this is the commitment that DoE has made. So understanding the challenges and the requirements for stability, DoE is pushing for earlier in 2018. Once the submissions had been all received, DoE had to go through all the issues that were raised. Based on the submissions raised, it required DoE to go back and re-work the IRP and IEP. If the submissions were not substantive, DoE would have probably finished. DoE is working with the CSIR to verify the baseline. There are only four computers in the country that can do the forecast properly, and once that is done, DoE will report to the Committee.

The Minister noted that she does not read fiction and she was perplexed at where Mr Mackay gets his information. For instance, saying that the Nuclear Build Programme is on track, she was uncertain where he got that information. If the Member had asked directly where the Nuclear Build programme is as far as its finalisation is concerned, the Minister would have furnished the information. As for the rest of the information raised by Mr Mackay, the Minister felt that it was fictitious. However, to answer the question on the Nuclear Build programme, in terms of the process from the court, DoE took a decision to review the process. DoE is now currently reviewing the process. DoE has been to Cabinet with the proposal for a way forward and once it is ready it will communicate to the public as far as the Nuclear New Build Programme is concerned.

The SFF does have a Chairperson, and a functional board, but the only position that is not yet filled is the position of the CEO, hence Director General Thabane Zulu is currently acting in that position. She expressed her uncertainty on where Mr Mackay got his information that there is no chairman or a functional board.

As for the storage of the Solar Water geysers, Cabinet pronounced that this programme should be driven by youth and women-owned businesses. The geysers must be installed by the youth, and by businesses that are owned by young people. DoE expected to procure from those businesses. The DDG was delegated to assist DoE to put this programme on track, and she has been working with the Deputy Minister of Cooperative Governance and municipalities and the Deputy Minister of Public Works.

The Minister assured the Members that she has no intention to purge people. Everyone is expected to do their work. If pertinent concerns are raised about an individual, she cannot simply overlook those on the basis that the person has received awards or has previously done exceptional work for DoE. At the end of the day, the Minister has to account to Parliament and indicate the steps she took to deal with those issues.

The vacancies are available because the structure was re-worked. A DDG position was created for clean energy but it was not filled due to financial constraints. DoE is trying to ensure that it does not compromise service, and it is trying to do as much as it can with the money available. The team is committed to work together to build DoE. Yesterday when the job interviews were conducted, it was interesting to learn that even people who were previously part of DoE were being interviewed which reflected their interest to come back to DoE. For one DDG position, DoE received over 90 CVs which shows that this is a department that people are interested in.

Mr Mbele responded that the delays in payments associated with the verification are indeed a shortcoming of the programmes. However, Treasury has made allocations for programme management for DoE to be able to seek resources outside of DoE to be able to do the verification as proposed. DoE wants to be part of the process rather than come in at the end. Currently DoE has been utilising internal resources that have been set aside for other programmes.

On consultation processes, DoE tries to go around the entire country to conduct these but the focus is normally the centres. DoE does most of its Imbizos in rural areas and in most cases in the form of flyers that contain the energy information.

As for the officials that have left DoE, for the period under review, 24 officials left due to contract expiry and others due to natural attrition. As of 31 March 2017, DoE had 35 vacancies.

The Chairperson stated that he sees the wisdom in waiting for the Auditor-General’s report so that the Committee can deal with issues arising from that report properly.

Mr Mackay suggested that the Minister start reading fiction as it seems she cannot distinguish between fiction and reality. The information he raised earlier was from a Sunday Times article which is a credible media in the mainstream media. The article reported that DoE is probing the possible violation of National Treasury regulations when DoE awarded an R87 million contract to a nuclear transaction advisor. If the Minister did not agree with these comments, she should go to the Press Ombudsman and lodge a complaint. He asked if DoE is currently disputing the audit findings of the Auditor-General.

He asked for clarity from the Minister about which Acting DDG is now heading the portfolio of the previous DDG (Mr Aphane) and whether there has been a resignation from Mr Aphane’s office specifically around those who were working on the planning function of the IRP and IEP. He asked why there is a delay in the IRP because it seems that DoE is making decisions without this policy document. This document has been taken to Cabinet and it was said that it would be finalised in August but it has been postponed again. Now DOE has received the public comments and submissions, he asked how the Committee will know what comments were made, how they were dealt with, and whether they will be made public. He would hate to find out that DoE has selectively chosen which comments to consider and respond to, which would influence re-writing of the IRP.

He asked what SSF knows about oil exploration, it is a dysfunctional organisation. A big company such as PetroSA was deemed to know little about oil exploration. Now a company that has been involved in illegal businesses and is not functioning optimally is involved in such a big contract. What is the nature of this contract? Nothing was said previously about this.

Lastly, he asked for clarity on whether Mr Aphane was suspended due to irregularities in the Solar Water Heater programme or the other charges that have been laid. He cannot see why that information cannot be shared because the horse has already bolted.

The Chairperson stated that there was no five hour meeting that took place the previous night between the ANC and DoE. Furthermore, Mr Mackay is pushing it too far because now it seems that he wants to know what was discussed at and who was invited to ANC caucus meetings. Most importantly, the Chairperson emphatically stated that he and Ms Mahambehlala never insisted on any specific transactional advisor being paid by DoE. Perhaps they could have spoken about the issue in general terms.

The Chairperson recalled that when Mr Aphane came before the Committee to present the IEP and IRP, there were ongoing consultation processes at the time. Mr Aphane explained the extension. The Chairperson had asked him a direct question about when the process will be concluded. The Chairperson asked Mr Aphane that before DoE goes to Cabinet, the team should come back to the Committee so that Members can make their inputs before the policy document goes to Cabinet. Mr Aphane then said that this will be done in August 2017.

The Minister responded that with regards to the Sunday Times article that Mr Mackay was referring to, indeed the article is incorrect. She did go to the newspaper’s offices to meet with the editor on 17 August with her spokesperson. The Minister did not want to lodge a formal complaint with the Press Ombudsman because she is seeking to build a good relationship with the media. There were actually three articles that she was unhappy with, and she expressed her concern and the newspaper house responded that it will deal with the matter and revert back to the Minister. Hence, the report is incorrect.

She appealed that Members of the Committee and others should not be spokespersons for employees. She did not comment on the disciplinary committee procedures and will not do so about any employee in a public space because that would prejudice the employee undergoing the hearing. So the disciplinary committee process should be allowed to take its course and she certainly refuses to disclose any information about disciplinary committee process.
 
On the IRP and IEP, the Minister said that DDG Mbele is now heading the planning team; it is not a one-man show. When DoE looked at the comments, it was not a one person job; the entire department was involved including the Minister. There is nothing DoE is hiding. All the submissions and comments will be made public and there will be disclosure about which comments have been incorporated and from whom or where. DoE wants to produce a credible document, so it undertook a thorough process in looking at those comments and submissions. This is policy; therefore the credibility of this document is pivotal. DoE cannot come to the Committee before Cabinet. The procedure is to go to Cabinet first and then come to the Committee.

The Minister said she has not given a ministerial approval regarding the Equatorial Guinea project referred to. However, if the approval was previously given, the Minister will check and come back to the Committee to report.

The Chairperson noted that there might not be meetings next week to the Women’s Conference. He thanked DoE and the members for their comments and questions.

The meeting was adjourned.